I'm studying for my series 6 and just confused about this part. Thanks
2007-09-12 03:03:27 · 2 answers · asked by AFK 2 in Business & Finance ➔ Investing
just to be a bit more simplistic - if you are buying a call, you want the stock to go up. Your possible gains are infinite (the stock could, in theory, gain 1,000,000%). Your loss is limited to the price of the call (if the stock never reaches the strike price, you won't exercise and it will expire)
If you write a call, you want the stock to go down. Your possible gain is the price of the call. Your possible loss is infinite (again, stock could go up and up and up, forcing you to buy shares at some extreme price, and deliver them for the strike price)
2007-09-12 03:20:04 · answer #1 · answered by jimbobbighouse 4 · 0⤊ 0⤋
If you write a call -- you are selling the contract. You get money now -- and the other person gets the right to make you sell the shares at the strike price if the price goes up.
If you buy a call, you pay money now for that right.
Write = sell
Buy = buy
2007-09-12 03:10:39 · answer #2 · answered by Ranto 7 · 3⤊ 0⤋